For Immediate Release - February 12, 2010

Attorney General Martha Coakley's Office Reaches $2.4 Million Settlement with Drug Manufacturer

BOSTON - Attorney General Martha Coakley's Office has reached a settlement agreement worth over $2.4 million with Watson Pharmaceuticals, Inc. (Watson), a Corona, California-based pharmaceutical manufacturer, resolving a Massachusetts False Claims Act case pending in United States District Court in Boston. The lawsuit alleged that Watson and its subsidiaries, Watson Laboratories, Inc., and Watson Pharma, Inc., reported false and inflated prices to drug industry price reporting services, which caused the Massachusetts Medicaid Program to pay inflated amounts for ingredient costs on prescriptions for Medicaid recipients.

"This settlement furthers our efforts to address this national and industry-wide problem," Attorney General Coakley said. "Our office will continue to work with the state's Medicaid program, other law enforcement agencies and the federal government to maintain the integrity of the pharmaceutical reimbursement program and ensure that it is fair to all involved parties."

Watson is one of a group of 13 generic drug manufacturers the Commonwealth sued in 2003 for allegedly falsely inflating the prices they reported to national pharmaceutical price reporting services. The Commonwealth's Medicaid Program, MassHealth, uses prices reported by national price reporting services to determine what they will pay to pharmacies for ingredient costs in connection with prescription drugs. The Commonwealth alleged that by reporting the false and inflated prices, the pharmaceutical companies caused the Medicaid Program to pay inflated amounts for ingredient costs for prescriptions for Medicaid recipients. Medicaid is a joint federal-state program which provides healthcare services, including prescription drugs, to low income and disabled persons.

The settlement resolves the Commonwealth's claims related to certain generic drugs that Watson manufactured and sold during the years 1995 to 2003, including carisoprodol, hydrocodone with acetaminophen, ibuprofen, labetalol, lorazapam, methylphenidate, Necon and trazodone. In agreeing to the settlement, Watson did not admit any wrongdoing and asserted that its price reporting was consistent with all legal standards. During part of the period of alleged misconduct, Watson Pharma, Inc. was an independent drug manufacturer, known as Schein Pharmaceutical, Inc (Schein)., headquartered in Florham Park, NJ. Watson acquired Schein in August 2000.

The Commonwealth has previously settled with seven other defendants in this case--Dey, Inc.; Barr Laboratories, Inc.; Duramed Pharmaceuticals, Inc; Ethex Corporation; Roxane Laboratories, Inc.; Teva Pharmaceuticals USA, Inc. and Ivax Corporation--recovering a total of $14.275 million from those seven companies for the Massachusette Medicaid Program. The case remains pending in federal court in Boston against five other defendants.

Attorney General Coakley's office has established itself nationally as a leader in the fight against fraud, waste and abuse in the Medicaid program. The office's Medicaid Fraud Division works to prevent and if necessary, prosecute provider fraud and violations of state law pertaining to fraud in the administration of the Medicaid Program. The division often works collaboratively with other enforcement authorities in other states, as well as with federal enforcement authorities. Since Attorney General Coakley took office in 2007, the Medicaid Fraud Division has recovered over $125 million dollars for the Massachusetts Medicaid program. In 2009, the division achieved its third consecutive year of record-breaking recoveries, returning $51.6 million to the Medicaid Program, including multi-million dollar settlements with such pharmaceutical giants as Astra Zeneca, Eli Lilly & Co., and Pfizer Inc.

The case was prosecuted by Assistant Attorneys General Peter A. Mullin, Nathaniel Yeager, Robert P. Patten, Colleen A. McCarthy, John Pina III, Gregory W. Matthews , Robyn P. Dollar and Steven T. Sharobem, with assistance from Investigators Anthony Megathlin, John J. Walsh and Steven Devlin, all of Attorney General Coakley's Medicaid Fraud Division.

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